Apple Class Action Doesn’t Need AT&T

SAN FRANCISCO (CN) – A class of iPhone users did not have to include AT&T in an antitrust action against Apple over its wireless exclusivity agreement with the carrier, the Ninth Circuit ruled Monday. In a 2-1 decision, a Ninth Circuit panel found the lower court had failed to analyze AT&T mobility’s interest in the litigation and how that interest could be affected if the action is resolved in its absence. Rule 19 under federal civil procedure defines a “required party” as someone who claims an interest in the case and cannot protect that interest unless they are joined. The panel also held that Apple had failed to show that AT&T had any cognizable legal interest in the action, even though it claimed the carrier’s contractual rights and reputation could be handicapped by its absence. “I think the 9th circuit’s analysis was exactly right. Apple never identified any interest that AT&T had,” class attorney Mark Rifkin with Wolf Haldenstein Adler Freeman & Herz LLP said in an interview. He said the class likely would have gone after AT&T if it didn’t have an arbitration clause with its customers. “But the fact is that AT&T insists on arbitration and Apple insists on being sued in court,” Rifkin told Courthouse News. “The 9th now says we didn’t have to sue AT&T as well.” Apple attorney Daniel Wall with Latham and Watkins could not be reached for comment. The action brought by lead plaintiffs Zack Ward and Thomas Buchar in 2012 was the third of three lawsuits claiming Apple and mobile carrier AT&T entered into a five-year exclusivity agreement shortly before the iPhone was introduced in 2007. Apple enforced the agreement by putting SIM card locks on iPhones without telling customers. If customers wanted an iPhone, they were unknowingly bound to use AT&T as their wireless carrier for five years, even though they signed two-year wireless service contracts with AT&T. The first lawsuit entered into arbitration. U.S. District Judge James Ware ruled in the second case that AT&T was a necessary party under Rule 19. The third case, consolidated with the second and reassigned to Judge Yvonne Gonzalez Rogers, adopted Ware’s reasoning and was dismissed on the grounds that the class had not added AT&T as a defendant. The fact that the class’ complaint portrayed AT&T as a central part of its alleged antitrust conspiracy was not enough to demonstrate that it was a necessary party, Judge Milan D. Smith wrote on behalf of the majority, which also comprised Judge Michelle T. Friedland. But he added, “The court did not identify any specific interest ATTM claimed in the action or explain how ATTM’s ability to protect that interest might be impaired by resolution of the action in its absence.” He said this analysis is essential, as an absent party could be bound to the outcome of the case. Judge Clifford Wallace said in his dissent that the appeal had no merit because the class had agreed to allow Rogers to dismiss the case based on Ware’s earlier order. He said the class needed Rogers to rule against them “to create a vehicle for appellate review of Ware’s order.” So they stipulated to dismiss their claims under Ware’s order and Rogers signed off on it. “At bottom, the Apple III plaintiffs invited Judge Rogers to sign on to an analysis from a different case with the specific intent to argue on appeal that the analysis was erroneous,” Wallace wrote. “In doing so, the Apple III plaintiffs sought improperly to skip over the district court to have us decide the Rule 19 issue in the first instance. They have thereby waived any challenge to the error they invited.”